STOREFRONTS: Crazy for chicken

Since El Pollo Loco brought its marinated-chicken concept to the United States from Mexico in 1980, the restaurant's popularity — and sales — have grown steadily. Now under new ownership and operating close to 300 stores in the West and Southwest, El Pollo Loco, Spanish for “The Crazy Chicken,” plans to open 100 new stores in the next five years. “We see terrific opportunities to continue growing our brand, both in Southern California where we already have a strong presence, and in our emerging Northern California, Arizona, Texas and Nevada markets,” says Brian Berkhausen, VP of development for the Irvine, Calif.-based chain.

El Pollo Loco was established in 1975 in the small town of Guasave on Mexico's Pacific Coast. Founder Juan Francisco “Pancho” Ochoa opened the first roadside chicken stand which featured an old family recipe. The poultry delicacy quickly became a local favorite, and by 1979 Ochoa had opened 85 El Pollo Loco restaurants in 20 Northern Mexican cities.

In 1980, Ochoa brought the concept to Los Angeles. In 1983, Denny's Inc. saw the chain's potential and purchased the company's U.S. operations. By 1991, there were 200 El Pollo Loco locations. In 1999, the chain was acquired by American Securities Capital Partners L.P., a private New York-based equity investment firm. The new ownership energized El Pollo Loco and spurred expansion plans, says Berkhausen. “Our new leadership has released us from the old ways and mind set of doing business,” he notes. “We're totally focused on growing and improving store operations.”

Today 283 El Pollo Loco stores dot the country, 130 of which are company-owned. The rest are franchise-operated. The company intends to maintain the roughly 50/50 split with its expansion plan, says Berkhausen. “It allows us to balance our capital needs but remain committed to the food-service business because we actually operate our own stores and are aware of what consumers want.”

El Pollo Loco is unique not only in its product offering — a menu of marinated, flame-broiled chicken served with tortillas, salsa, and Mexican-inspired side dishes — but in its fresh approach to fast food, Berkhausen adds. Chickens are grilled, hand-cut, and served in full view of customers, underscoring that each meal is made to order. This approach garnered the chain sales of $305 million in 2000.

As Berkhausen explores potential sites for the new restaurants, he looks first for regional retail hubs such as malls or centers with large home-improvement or grocery stores. “We like to be close to the shopping center, but freestanding,” he adds.

As far as the targeted Loco patrons, “With the latest U.S. Census showing significant growth in the Hispanic population, we're extremely well positioned demographically,” Berkhausen explains. “But we do very, very well in general markets and suburban communities, too.”

Healthy-and-growing sales volumes in the past two years indicate El Pollo Loco's marinated-chicken concept is a recipe for success. Berkhausen says sales are 40% higher than its competitors in the fast-food chicken category, and in some markets rival those of McDonald's, Burger King, and Carl Jr.'s. “Our goal now is to obtain flagship, high-profile locations and experienced franchisees to help us build the brand,” says Berkhausen.